Jeb Bladine: Employers need new tax protection

Employers neednew tax protection

Today’s continuation of our “Navigating Unemployment” series comes as Congress continues high-stakes negotiations on new relief measures for economic victims of the COVID-19 pandemic.

However that goes – not known as this issue goes to press but expected soon – Oregon employers suffering 2020-21 job losses will turn their focus to the state Legislature in Salem.

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Jeb Bladine is president and publisher of the News-Register.

> See his column

Will Oregon’s unemployment tax system add financial insult economic injury? Will employers trying to recover from pandemic-related losses be hit with huge new tax bills in 2021-24?

The answer is a resounding “Yes,” unless Oregon legislators act.

Business organizations are lobbying for relief, but today’s Oregon Legislature is not well-known for easing tax burdens. Oregon businesses already have been shackled with the grossly unfair Corporate Activity Tax, enacted despite all the opposition Oregon business interests could muster.

Here are some basics about Oregon unemployment taxes:

Employers pay a minimum 1.2 percent on up to $43,800 in individual employee wages. The maximum tax rate is 5.4 percent, with rate increases directly tied to unemployment benefits received by employees or past employees.

In good economic times, rates generally are low, but even at 1.2 percent it costs employers up to $525 per employee to replenish the state's unemployment Trust Fund. Suppose, after a year of pandemic-related shutdowns, a company’s tax rate jumps to 4.8 percent – that’s up to an additional $1,575 per employee in taxes for employers who already are financially strangled.

Oregon has done well to protect stability of its unemployment Trust Fund, but the Oregon Unemployment Department downplayed the 2021 tax increases by announcing “a modest shift” to an average rate of 2.26 percent. That analysis fails on multiple counts.

First, the average rate includes all employers who have maintained full employment and low unemployment tax rates. Businesses and other organizations hardest hit by the pandemic have much higher tax rates coming in 2021 and beyond.

Second, calculation of rates for next year disregards benefits earned prior to June 30 but not paid until later. Those delayed benefit payments will add an extra boost to 2022 unemployment tax rates.

Third, hardest-hit employers have reduced payrolls this year and next. That factor combines with high benefits paid to employees to produce even higher tax rates.

Oregon employers already victimized by the pandemic need to fully understand the unemployment tax surge coming, unless legislators intervene. Their advocates need to look past a sugar-coated analysis of 2021 unemployment tax rates and give high priority to protecting employers from another round of unfair state taxation.